U.S. Congress prepares for flurry of housing legislation

DamianPaletta

WASHINGTON (MarketWatch) -- Democratic leaders in Congress are preparing to consider multiple bills Thursday targeting homeownership, attempting to send a message to voters as economic issues grow in relevance for next year's elections.

Thursday's votes could be the last time lawmakers address housing issues this year, because they break for Thanksgiving Friday and must consider multiple spending bills before leaving for another break in December.

"We have a role to play here," Sen. Byron Dorgan, D-N.D., said on the Senate floor. "The first and most important thing is to help those who have been victimized by this unbelievable speculation and greed, and the second is to make sure it doesn't happen again."

In the House of Representatives, House Financial Services Committee Chairman Barney Frank, D-Mass., plans to lead debate on a bill that would reform the way mortgage loans are originated, securitized and regulated.

"The bill is an effort to preserve lending to people with weaker credit without continuing a pattern of excess and abuse," Frank told the House Rules Committee late Wednesday.

Some members of the banking industry are still lobbying to kill the legislation, saying it will make it harder to make loans to low-income borrowers. But the bill is expected to pass easily, because more than a dozen Republicans have already endorsed the measure.

"I think this is a great product," Rep. Deborah Pryce, R-Ohio, told the House Rules Committee after Frank's comments.

Some Republicans, including Reps. Patrick McHenry, R-N.C., and Scott Garrett, R-N.J., plan to challenge the bill with amendments, but these amendments are expected to be defeated.

Frank's bill, co-sponsored by Reps. Brad Miller, D-N.C., and Mel Watt, D-N.C., would, among other things, require mortgage originators to be licensed and prohibit certain refinancings that don't benefit the borrower. The bill would also require lenders to consider a borrower's ability to repay an adjustable-rate mortgage at the fully indexed rate, not just at the low teaser rate.

In the Senate, lawmakers could vote Thursday to approve a bill that would modernize the Federal Housing Administration, making it easier for more borrowers to refinance out of subprime loans into government-insured loans.

The bill passed the Senate Banking Committee 20-1, and President George W. Bush has said modernizing the FHA would help borrowers avoid foreclosure. Panel chairman Christopher Dodd, D-Conn., won't be in Washington Thursday to help the bill through, since he is preparing for a Democratic presidential debate in Las Vegas.

Senate Majority Leader Harry Reid, D-Nev., has requested that the bill be considered by unanimous consent, which means it would not need to be debated on the Senate floor.

But several people familiar with the matter have said Sen. Elizabeth Dole, R-N.C., has placed a hold on the bill, blocking it from unanimous consent. Dole was the lone dissenting vote in the Senate Banking Committee. A spokeswoman for Dole was not immediately available for comment.

The House has already passed a similar bill, and if the Senate approved the measure, both sides would meet in a conference committee to resolve differences before sending the measure to the White House for possible approval.

Separately, the Senate could vote on a measure sponsored by Sen. Chuck Schumer, D-N.Y., that would temporarily lift the portfolio limits at Fannie Mae
FNM, +7.06%
and Freddie Mac
FRE, +2.92%
to provide more liquidity for the mortgage market.

The bill isn't expected to pass Thursday, but it could give Democrats another opportunity to argue that they are pushing to help stabilize the housing market.

"One thing we need to do is do something with FHA, with Fannie and Freddie, who are organizations we set up in Congress to help people buy homes," Reid said on the Senate floor.

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